Zero-Emission Vehicle Package - The 2022-23 Budget

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2022-23 BUDGET

The 2022-23 Budget:
Zero-Emission Vehicle Package

     Summary
       Governor Proposes $6.1 Billion for Zero-Emission Vehicle (ZEV)-Related Activities.
     The Governor proposes a total of $6.1 billion from various fund sources over five years for a
     package of proposals related to ZEVs. Most of the proposed funding would continue and/or
     expand existing programs, such as heavy-duty and off-road programs, ZEV fueling infrastructure
     programs, and programs focused on cleaner vehicles and mobility for low-income households
     and disadvantaged communities (also known as transportation equity programs).
       Mix of Spending Depends on Legislative Priorities. Ultimately, budget allocations will
     depend on how the Legislature prioritizes different policy goals:
        •  Near-Term Greenhouse Gas (GHG) Reductions. Truck and bus vouchers are one of the
           most cost-effective GHG reduction mobile source incentive programs. However, overall, the
           GHG costs for mobile source incentive programs are relatively high. The Legislature might
           want to consider relying on other programs if the goal is to achieve the most cost-effective,
           near-term GHG reductions.
        •  Near-Term Local Air Pollution Reductions. Heavy-duty retirement and replacement
           programs—such as Carl Moyer, Funding Agricultural Replacement Measures for Emission
           Reductions (FARMER), and AB 617 incentives—are relatively cost-effective programs for
           reducing air pollution.
        •  Advancing ZEV Technologies. Programs that focus on advancing ZEV technologies in
           their early stages of market development—such as heavy-duty pilots, demonstrations, and
           vouchers—could help achieve long-term GHG and air pollution goals.
        •  Air Quality Benefits in Disadvantaged Communities. To improve air quality in
           disadvantaged communities, the Legislature could support programs that reduce local air
           pollution cost-effectively and where the vast majority of the spending benefits low-income
           and disadvantaged communities, such as AB 617 incentives.

       Unclear How State Funding Will Be Used to Leverage Federal Funds. The Legislature
     might want to require the administration to develop a plan for how state funds can be used to
     complement federal charging infrastructure funds, including a description of how state funding
     can be used to leverage federal funding or fill in the major gaps in federal funding.
       Consider Trade-Offs of Multiyear Funding Commitments. On the one hand, multiyear
     commitments can provide market certainty and make it easier for departments to design and
     administer programs. On the other hand, they have to potential to reduce future legislative
     oversight and create General Fund pressures in future years.

                        G A B R I E L P E T E K | L E G I S L AT I V E A N A LY S T
                        FEBRUARY 2022
www.lao.ca.gov                                                                                             1
2022-23 BUDGET

BACKGROUND
   State Has Ambitious Climate Change and                   •  Heavy-Duty Vehicles. This includes large
Air Quality Goals. California has a variety of                 trucks (such as long-haul trucks), garbage
goals related to reducing greenhouse gas (GHG)                 trucks, some port equipment (such as drayage
emissions, as well as regional and local air pollution.        trucks), and buses. Currently, most of these
For example:                                                   vehicles are powered by diesel engines,
    •  GHG Limit. Chapter 249 of 2016                          or in some cases the vehicles use hybrid
       (SB 32, Pavley) established a statewide                 technologies or engines powered by natural gas.
       GHG limit of 40 percent below 1990 levels by         •  Off-Road Equipment. This includes a
       2030. (The Governor also has an executive               wide range of equipment types, including
       order establishing a goal of statewide carbon           locomotives, ocean-going vessels, commercial
       neutrality by 2045, but this target is not in           harbor craft, portable generators, agricultural
       state law.)                                             equipment, construction equipment, lawn
    •  Federal Air Quality Standards. California has           and garden equipment, forklifts, aircrafts,
       two areas with the most critical air quality            and recreational boats. Currently, most of this
       challenges in the nation—the South Coast Air            equipment is powered by diesel engines.
       Basin and the San Joaquin Valley. Substantial         As shown in Figure 1, mobile sources represent
       reductions in criteria pollutants from all         a substantial share of California’s GHGs and air
       sources—specifically, nitrous oxides (NOx) and     pollution. In particular, these sources represent about
       fine particulate matter (PM2.5)—are needed to      40 percent of GHGs and over 70 percent of statewide
       meet increasingly stringent federal air quality    NOx emissions. (This does not include “upstream”
       standards in the coming years.                     GHG emissions, such as emissions related to
    •  AB 617 Community Emissions Reduction               producing or refining crude oil.) Light-duty vehicles
       Plans. Pursuant to Chapter 136 of 2017             make up the largest share of mobile source GHG
       (AB 617, C. Garcia), some of the communities       emissions, while heavy-duty vehicles and off-road
       with the worst air quality in California have      equipment make up the majority of mobile source
       adopted plans that identify five- and ten-year     NOx. Heavy-duty vehicles and off-road equipment
       targets to reduce air pollution exposure from      are also primary sources of diesel particulate matter,
       various sources.                                   which the California Air Resources Board (CARB)
                                                          estimates is the source of 70 percent of total known
   Mobile Sources Represent a Large Portion of
                                                          cancer risk related to air toxics in California.
Emissions. Emissions that come from vehicles and
other types of mobile equipment are also known as            Air Pollution Differs Between Regions and
“mobile sources.” Mobile sources include several          Communities. Certain regions—such as the Central
different types of vehicles and equipment, such as:       Valley and South Coast—and communities—such as
                                                          those near ports, highways, and freight corridors—
    •  Light-Duty Vehicles. This includes passenger       are disproportionately impacted by air pollution from
       cars and smaller pick-up trucks. Currently,        mobile sources. In addition, as shown in Figure 2,
       most of these vehicles have gasoline-powered       research supported by CARB found that PM2.5
       internal combustion engines.                       exposure from on-road sources is 53 percent
    •  Medium-Duty Vehicles. This includes vehicles       higher in disadvantaged communities (as defined
       that weigh more than 8,500 pounds up to            by the California Environmental Protection Agency)
       14,000 pounds, such as larger pick-up trucks       than the statewide average. The higher exposure
       and neighborhood delivery vans. Currently,         in disadvantaged communities is at least partially
       these vehicles are primarily fueled by gasoline    because of the way disadvantaged communities
       or diesel.                                         are defined, which is—in part—based on estimated
                                                          exposure to PM2.5. This research also found

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  Figure 1

  Mobile Sources Are Major Contributors to Climate Change and Air Pollution
  2019 Statewide Share of Emissions by Source

                    Greenhouse Gases                                                    Nitrogen Oxides

                                                                                                                       Medium Duty 3%
                                                                                                         Light
                                                                                                         Duty
                                                                                                         8%

                                                                            Stationary/Other
                                Light Duty 28%
                                                                            28%

                                                                                                              Heavy Duty 29%
             Stationary/Other
             60%                        Medium
                                        and Heavy
                                        Duty 8%
                                                                                      Off Road 33%

                                            Off Road 3%

that PM2.5 exposure from on-road sources was
10 percent higher for low-income households and           Figure 2
18 percent higher for Black and Hispanic populations.
Policies that reduce PM2.5 exposure from on-road
                                                          California PM2.5 From On-Road Sources
                                                          Disproportionately Affects Certain
sources could have disproportionate benefits for
                                                          Populations and Areas
these communities.
                                                          Population-Weighted Average Exposure Concentration
    State Has A Variety of Programs to Reduce             (Micrograms Per Square Meter)
Emissions and Promote ZEVs. The state
administers a wide variety of programs intended to
                                                          3.0
reduce mobile source emissions, including programs
that promote zero-emission vehicles (ZEVs). This          2.5
includes funding for light-duty vehicles, heavy-duty
vehicles, off-road equipment, and ZEV fueling             2.0

infrastructure. For example, the 2021-22 budget
                                                          1.5
agreement provided $3.9 billion over three years for
various programs to reduce emissions and promote          1.0
ZEVs. (For more detail, see our post, The 2021-22
California Spending Plan: Natural Resources and           0.5

Environmental Protection.) In addition, the state
has a wide range of regulatory programs that are                     Statewide         Low Income
                                                                                                     a
                                                                                                          Black/Hispanic   Disadvantaged
meant to encourage ZEVs, including a ZEV mandate                      Average                                               Communities

requiring a certain number of light-duty vehicles sales   a
                                                              Lowest 20 percent of household income distribution.
be ZEVs. (For more information about some of the              Source: Apte et al. (2019)
key state programs intended to reduce transportation          PM2.5 = fine particulate matter.

GHG emissions, see our 2018 report Assessing
California’s Climate Policies—Transportation.)

www.lao.ca.gov                                                                                                                             3
2022-23 BUDGET

PROPOSAL
   Governor Proposes Additional $6.1 Billion                                           Mostly Expands Existing Programs, but
for ZEV-Related Activities. The Governor                                            Creates Some New Programs. Most of the
proposes a total of $6.1 billion from various                                       proposed funding would continue and/or expand
fund sources (General Fund, Greenhouse Gas                                          existing programs, such as heavy-duty and
Reduction Fund [GGRF], and federal funds) over                                      off-road programs, ZEV fueling infrastructure
five years for a package of proposals related                                       programs, and programs focused on cleaner
to ZEVs. Figure 3 summarizes the Governor’s                                         vehicles and mobility for low-income households
proposed ZEV package, as well as the ZEV                                            and disadvantaged communities (also known
package adopted as part of last year’s budget.                                      as transportation equity programs). The most
In 2022-23, most of the proposed $2.7 billion is for                                significant new programs and programmatic
school buses ($1.5 billion), and heavy-duty vehicle                                 changes proposed by the Governor include:
and infrastructure incentives ($700 million).

    Figure 3

    Summary of Approved and Proposed ZEV Packages
    General Fund, Unless Noted Otherwise (In Millions)

                                                                  2021-22 Package                           Proposed 2022-23 Package
    Program                                  Department                   Total              2022-23       2023-24       2024-25       2025-26        Total

    Light-Duty Vehicles
    Clean Vehicle Rebate Project           CARB                           $525                   —             —             —              —            —
    Clean Cars 4 All and Other             CARB                            400                 $171a          $50           $35             —          $256
      Equity Projects
    Transportation Equity, Mobility,       CARB, CalSTA                      —                   65           130           134          $90            419
      and SCS Pilots
    ZEV Fueling Infrastructure             CEC                             300                  100           220           210            70           600
      Grants
    Equitable At-Home Charging             CEC                              —                    60           100            90            50           300
    Transportation Package ZEVb            CalSTA                          407                   77            77            77            76           383c
    Heavy-Duty and Off-Road Vehicles
    Drayage Trucks & Infrastructure        CARB, CEC                      $535                  —            $200          $170         $105           $475
    Transit Buses and Infrastructure       CARB, CEC                       290                  —             200           160          100            460
    School Buses and Infrastructure        CARB, CEC, CDE                  450              $1,500             —             —            —           1,500
    Clean Trucks, Buses, and Off-          CARB, CEC                       700                 700d           200           165           35          1,100
      Road Equipment
    Ports                                  CARB, CEC                         —                   —            100           200           100           400
    Near-Zero Heavy-Duty Trucks            CARB                              45                  —             —             —             —             —
    Emerging Opportunities                 CARB, CEC                         —                   20            50            86            44           200
    Other
    ZEV Consumer Awareness                 GO-Biz                           $5                   —              —             —             —             —
    ZEV Manufacturing Grants               CEC                             250                   —              —             —             —             —
    		Totals                                                            $3,907               $2,693        $1,327        $1,327         $746         $6,093
    a Includes $76 million Greenhouse Gas Reduction Fund.
    b Includes federal funds.
    c Includes $76 million in 2026-27.
    d Includes $600 million Greenhouse Gas Reduction Fund.

      ZEV = zero-emission vehicle; CARB = California Air Resources Board; SCS = Sustainable Communities Strategies; CalSTA = California State Transportation
      Agency; CEC = California Energy Commission; CDE = California Department of Education; and GO-Biz = Governor’s Office of Business and Economic
      Development.

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  •  School Bus Program ($1.5 Billion                 •  Equitable At-Home Charging ($300 Million
     Proposition 98 General Fund).                       General Fund). The proposal includes a
     This program would provide competitive              total of $300 million over four years—with
     grants to school districts to replace               $60 million in 2022-23—for EV charging
     nonelectric school buses with electric buses        infrastructure at multi-unit dwellings and
     and purchase related infrastructure.                low-income, single-family homes. The funds
  •  ZEV Fueling Infrastructure Grants                   would be used for Level 2 charging stations
     ($600 Million General Fund). The proposal           and electrical panel upgrades. (Level 2
     includes a total of $600 million over four          charging stations provide about 14-35 miles
     years—with $100 million in 2022-23—for              of driving range per hour of charging.)
     electric vehicle (EV) charging infrastructure.   •  Potential Sustainable Communities
     Unlike last year’s ZEV package, this proposal       Strategies (SCS) Pilots. As part of the
     would prioritize fast chargers.                     proposed funding for SCS pilots and other
  •  Federal Funding for ZEV Infrastructure              equity programs, CARB would consider
     ($383 Million Federal Funds). The proposal          creating a new pilot program that would
     includes federal funding available to               incentivize transportation agencies to
     California through the federal Infrastructure       prioritize projects that reduce vehicle
     Investment and Jobs Act (IIJA) enacted in           miles traveled (VMT), rather than roadway
     November 2021. Specifically, it includes            expansion projects. The proposed budget
     $383 million for five years from the National       does not provide funding explicitly for this
     Electric Vehicle Infrastructure Formula             pilot project, but CARB would consider it as
     Program, which is intended to support               part of its typical Low Carbon Transportation
     fueling infrastructure along designated             Investment Plan process after the budget
     alternative fuel corridors, such as along the       is adopted.
     Interstate Highway System.

www.lao.ca.gov                                                                                       5
2022-23 BUDGET

ASSESSMENT
   In this section, we provide our assessment of                                      Two-Thirds of New Funding for Heavy-Duty
the Governor’s proposed ZEV package, except                                        Vehicle Programs. Over two-thirds of the
the $1.5 billion proposal for electric school buses                                proposed funding would support heavy-duty
which we discuss in our recent brief, The 2022-23                                  vehicle programs, as shown in Figure 5.
Budget: Green School Bus Grants.                                                   (This includes the $1.5 billion for electric school
                                                                                   buses.) A majority of the funding in the 2021-22
Package Funds Different Types of                                                   ZEV package was also targeted at such programs.
Vehicles and Prioritizes Heavy-Duty                                                Under the Governor’s plan, about 62 percent
ZEVs                                                                               of the combined $10 billion total from both
   Funding Expected to Support a Variety                                           ZEV packages would go to heavy-duty vehicle
of Vehicle Types and Fueling Infrastructure.                                       programs. Funding for light-duty vehicles would
As shown in Figure 4, the proposed funding                                         be targeted to transportation equity and mobility
would support a variety of vehicles, EV charging                                   programs, as well as fueling infrastructure. No new
stations, off-road equipment, and other projects.                                  funding would be allocated to the state’s main ZEV
The estimated amounts are subject to uncertainty                                   rebate program, the Clean Vehicle Rebate Project
because (1) the final allocations will depend on                                   (CVRP), but $100 million would be available to
decisions made by departments about how to                                         support higher CVRP rebate amounts for low- and
allocate the funding to specific subprograms                                       moderate-income households. We note that the
or projects and (2) actual deployment amounts                                      $525 million allocated to CVRP in the 2021-22
could also depend on which technologies are                                        budget was intended to cover three years of funding
actually purchased. For example, the number of                                     for the main CVRP program.
vehicles supported through the clean truck and
bus vouchers depends on which technologies
businesses and governments ultimately choose to
purchase with the vouchers.

    Figure 4

    Estimated Number of Vehicles, Chargers, and Projects
    Supported With Proposed Funding
    (In Millions)

    Program                                                                Amount                             Estimated Deployment

    Light-Duty
    ZEV Fueling Infrastructure                                               $600              5,000 DC fast chargers
    Transportation Equity, Mobility, and SCS Pilots                           419              100 projectsa
    Equitable At-Home Charging                                                300              28,000 Level 2 MUD chargers; 50,000 home chargers
    Vehicle Rebates for Low-Income Consumers                                  100              20,400 vehicles
    Financing Assistance for Low-Income Consumers                              80              12,300 vehicles
    Clean Cars 4 All                                                           76              6,600 vehicles
    Heavy-Duty and Off-Road
    Clean Trucks, Buses, and Off-Road Equipment                              $600              4,100 vehicles and equipment
    Transit Buses and Infrastructure                                          320              1,600 buses
    Ports                                                                     250              860 pieces of off-road equipment
    Drayage Trucks and Infrastructure                                         225              1,000 trucks
    Emerging Opportunities                                                    100              10 projectsa
    a Each project may fund multiple vehicles and equipment.

     Source: California Air Resources Board and Energy Commission.

     SCS = Sustainable Communities Strategies; ZEV = zero-emission vehicle; and MUD = multi-unit dwellings.

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  Figure 5

  Over 60 Percent of Total Funding Would Go to Heavy-Duty Vehicles and Equipment

             Adopted 2021-22 Package                            Proposed 2022-23 Package

                          Other
                           6%

                                                                 Light Duty
                                                                 32%

             Light Duty           Heavy Duty
             42%                  52%
                                                                                   Heavy Duty
                                                                                   68%

Programs Target Different Policy Goals                 programs are more cost-effective at reducing
With Varying Levels of Effectiveness                   air pollution. Furthermore, some programs do
                                                       more to promote zero-emission technological
   Mobile Source Emission Programs Aim to
                                                       advancements that can help meet long-term
Achieve Different Policy Goals… The state has a
                                                       emissions goals, while others do more to target
wide variety of mobile source incentive programs.
                                                       funding in ways that benefit low-income and
These programs aim to achieve one or more
                                                       disadvantaged communities. We discuss these key
different policy goals, including: (1) near-term GHG
                                                       differences in more detail in the remainder of this
reductions; (2) near-term air pollution reductions;
                                                       section. (For more detail on the methods used to
(3) advancements in zero-emission technologies,
                                                       determine the measurements identified in Figure 6,
which could have longer-term GHG and air quality
                                                       see the box on page 9.)
benefits; and/or (4) ensuring program benefits
are distributed equitably across different areas           Notably, Figure 6 does not include an evaluation
and populations, often with a focus on reducing        of the state’s main vehicle rebate program (CVRP)
pollution in areas that are disproportionately         or ZEV infrastructure funding. As discussed in the
low-income and/or have poor air quality. All four      box on page 10, evaluating the net effects of mobile
of these are reasonable policy goals. However, in      source programs on GHGs and air pollution can be
many cases, the Legislature will have to balance the   especially challenging and a more rigorous analysis
trade-offs between these goals when determining        is likely needed to provide reliable information
how to prioritize funding across different programs.   on program cost-effectiveness compared to
In addition, some programs might have other policy     other programs.
goals, such as increasing mobility.                        Mobile Source Emission Reduction Programs
   …And Degree of Effectiveness Varies                 Are Relatively Costly Approaches to Near-Term
Between Programs. As shown in Figure 6 on              GHG Emission Reductions. Of the programs
the next page, the degree to which mobile source       listed earlier in Figure 6, the most cost-effective
incentive programs achieve each policy goal varies     program for reducing near-term GHGs is the Clean
by program. For example, some programs are             Truck and Bus Voucher Program with estimated
more cost-effective at reducing GHGs, while other      costs of $350 per ton. The other incentive programs
                                                       have costs close to or exceeding $1,000 per ton.

www.lao.ca.gov                                                                                            7
2022-23 BUDGET

    Figure 6

    Mobile Source Program Effectiveness Varies Between Program and Policy Goal
                                                           GHG Cost-            Air Pollution Cost-
                                                          Effectiveness           Effectiveness             Technology           Benefiting Priority
    Program                                                  ($/Ton)a           ($/Weighted Ton)a          Advancement b           Populationsc

    Transportation Equity
    Low-Income Financing Assistance                           $830                  $538,000               Low-Medium                      84%
    Clean Cars 4 All                                            920                   438,000              Low-Medium                      97
    Clean Mobility in Schools                                 2,450                   235,000              Low-Medium                     100
    Clean Mobility Options                                   11,400                 4,122,000              Low-Medium                     100
    Sustainable Transportation Equity Project                 5,050                 4,845,000              Low-Medium                     100
    Heavy-Duty and Off-Road ZEVs
    Clean Truck and Bus Vouchers (HVIP)                        $350                   $96,200              Medium                          63%
    Off-road Equipment Vouchers (CORE)                        1,710                   481,000              Medium                          73
    Demo/Pilots                                              18,800                   110,000              Medium-High                    100
    Heavy-Duty Retirement and Replacement
    FARMER                                                   $1,679                     $8,979             Low                             70%
    Carl Moyer                                                1,670d                    11,700             Low                             N/A
    AB 617 Incentives                                         1,661                     12,486             Low-Medium                      94
    a CARB estimate.
    b LAO estimate.
    c Administration’s estimate.
    d LAO estimate based on average of FARMER and AB 617 incentives.

     GHG = greenhouse gas; ZEV = zero-emission vehicle; HVIP = Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project; CORE = Clean Off-Road
     Equipment; FARMER = Funding Agricultural Replacement Measures for Emission Reductions; N/A= not available; CARB = California Air Resources Board;
     and AB 617 = Chapter 136 of 2017 (AB 617, C. Garcia).

By comparison, other state programs are likely                                   hundreds of thousands of dollars to millions of
more cost-effective. For example, current                                        dollars per ton for most other programs. These
cap-and-trade allowance prices are about $30 per                                 programs largely provide funding to retire older,
ton and Low Carbon Fuel Standard credits are                                     high-polluting engines and replace them with
about $150 per ton. (In our view, these allowance                                cleaner fossil fuel engines (such as natural gas),
and credit prices are a reasonable proxy for                                     rather than focusing on zero-emission technologies
the marginal costs of near-term GHG emission                                     such as battery electric and fuel cells. Each of
reductions from these programs.) Also, according to                              these programs would receive funding under the
the administration’s estimates, other GGRF funded                                Governor’s budget, but they would not receive
incentive programs, such as methane reduction                                    additional funding as part of the proposed
programs, cost less than $100 per ton.                                           ZEV package.
   Heavy-Duty Retirement and Replacement                                            The cost-effectiveness estimates for GHGs
Programs Are Relatively Cost-Effective                                           and air pollution reductions illustrate some of the
Approach for Air Pollution Reductions. The most                                  important trade-offs the Legislature faces when
cost-effective programs for reducing near-term                                   determining its budget priorities for programs
local criteria pollutants appear to be the Funding                               intended to reduce emissions. For example,
Agricultural Replacement Measures for Emission                                   Figure 7 on page 11 shows the estimated GHG
Reductions (FARMER) Program, the Carl Moyer                                      reductions and local air pollution reductions
Program, and AB 617 incentives (also known as                                    associated with providing $1 million in funding
Community Air Protection incentives). Estimated                                  to each program. Of the programs analyzed in
costs to reduce a weighted ton of criteria pollution                             this report, the Hybrid and Zero-Emission Truck
ranges from $8,979 to $12,486 per ton in these                                   and Bus Voucher Incentive Project (HVIP) would
programs, compared to costs ranging from the                                     achieve the greatest GHG reductions, but the

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     Measuring Impact of Mobile Source Incentive Programs
        We provide information below on how we determined the different measurements included in
     Figure 6 regarding the impact of various mobile source incentive programs.
        Greenhouse Gas Cost-Effectiveness. This is based on estimates from the California Air
     Resources Board (CARB) on the average program spending per ton of carbon dioxide equivalent
     reduced over the life of the projects. These estimates include only projects implemented in the
     last few years.
        Air Pollution Cost-Effectiveness. This is based on CARB estimates of average program
     spending per ton of weighted criteria pollutant reductions over the life of the projects. Weighted
     criteria pollutant reductions are calculated by adding tons of nitrogen oxide emissions, reactive
     organic gases, and particulate matter. For heavy-duty vehicles and equipment, particulate matter
     reductions are multiplied by 20 to account for the toxic health hazards associated with diesel
     particulate matter. (This is consistent with weighting that has historically been used in the Carl
     Moyer Program.) These estimates include only projects implemented in the last few years.
        Technology Advancement. This is based on our assessment of the degree to which each
     program could help promote zero-emission technologies. Programs that primarily focus on
     promoting cleaner fossil fuel engines (such as natural gas) and/or widely available zero-emission
     vehicle (ZEV) technologies (such as light-duty ZEVs) generally score low. Programs that focus on
     promoting ZEV technologies that are in the early stages of commercial availability (such as truck
     and bus vouchers) generally score medium. Programs that focus on pilots and demonstrations for
     new technologies generally score high. These assessments are based on our best judgement, but
     state departments and other researchers might have different, yet reasonable, assessments.
        Benefiting Priority Populations. We use the administration’s estimates of the portion
     of Greenhouse Gas Reduction Funds that have been allocated to projects that benefit
     disadvantaged communities and/or low-income households and communities (also known as
     “priority populations”), as reported in the administration’s 2021 Annual Report to the Legislature
     on California Climate Investments.

heavy-duty retirement and replacement programs              Unfortunately, it is difficult to assess these
would achieve the greatest air pollution reductions.     technology benefits quantitatively. In general,
Notably, in the near term, none of the programs          heavy-duty and off-road technologies are farther
would cost-effectively reduce both GHGs and              behind in technological and market development
air pollution.                                           than light-duty ZEVs, so there is greater potential
   Programs Promoting Technological Advances             for technological advancement. In our view, pilot
Could Help Achieve Long-Term Emission                    and demonstration projects generally have the most
Reductions. Some programs aim to help advance            potential technological benefits because they are
ZEV technologies, which could help achieve               supporting early stage technologies and projects
long-run GHG and air pollution reduction goals.          that very likely would not otherwise be funded by
Also, in our view, policies that attempt to promote      the private sector.
research, development, and demonstration of new             Role of Transportation Equity Programs in
technologies is a reasonable role for government.        Achieving Policy Goals Is Unclear. Compared to
This is because, without such support, the private       other mobile source programs, it is unclear whether
sector would tend to underinvest in these activities     the transportation equity programs achieve any
and cleaner technologies might not reach the             of the Legislature’s policy goals effectively. First,
commercial market in a timely manner (or at all).        transportation equity programs appear to be a

www.lao.ca.gov                                                                                               9
2022-23 BUDGET

     Light-Duty Vehicle Rebate and Infrastructure Programs Difficult to Evaluate
        Evaluating cost-effectiveness can be challenging for many mobile source programs, but
     especially certain light-duty, zero-emission vehicle (ZEV) programs. Below, we describe some
     of the key challenges for two main programs: the Clean Vehicle Rebate Project (CVRP) and
     light-duty ZEV public fueling infrastructure.
        CVRP. The CVRP program interacts with other programs in ways that make it difficult
     to determine how much of ZEV adoption is related to CVRP versus other ZEV programs.
     For example, one recent analysis found that light-duty vehicle subsidies have relatively little effect
     on ZEV adoption in California after accounting for the state’s ZEV mandate that requires car
     manufacturers to sell a certain percentage of ZEVs. The CVRP largely shifts who pays the costs
     for the ZEVs, not how many ZEVs are ultimately purchased. Current CVRP estimates provided by
     the California Air Resources Board (CARB) do not take either of these interactions into account
     when estimating cost-effectiveness. As a result, we do not include these estimates in our
     cost-effectiveness analysis.
        It is worth noting that similar methodological issues have been identified in previous reports
     by our office and the California State Auditor. In response to the auditor’s report, CARB has
     entered into a contract with researchers to improve its data collection and help develop evaluation
     strategies to disentangle the effects of overlapping programs.
        Light-Duty ZEV Public Fueling Infrastructure. So far, much of the funding provided to the
     California Energy Commission to support ZEV fueling infrastructure has been used for fueling
     and charging infrastructure in public and shared locations, such as parking lots, workplaces,
     and multi-unit dwellings. As we have noted in previous reports, we think there is a reasonable
     rationale for government support of public fueling infrastructure as a strategy to promote ZEVs.
     However, it is difficult to measure the degree to which additional public infrastructure influenced
     a household’s decision to purchase a ZEV, compared to other programs and factors. As a result,
     we do not include estimates of fueling infrastructure cost-effectiveness in our analysis.

relatively costly way to reduce both local pollution       New Programs Raise Several Key
and GHGs. Second, most of these programs focus             Implementation Questions
on light-duty vehicle and mobility programs which,
                                                              Some of the funding proposed by the Governor
in our view, only have modest potential to drive
                                                           would go to new programs where key program
technological advancements—likely less than some
                                                           design and implementation details are unclear.
of the heavy-duty ZEV programs. Finally, although
                                                           Below, we identify several questions about
the vast majority of funding from these programs
                                                           the implementation of two new programs—the
goes to projects that benefit low-income and
                                                           Equitable At-Home Charging program and the
disadvantaged communities, the percentage is not
                                                           potential SCS pilots.
significantly more than some of the other programs.
                                                              Equitable At-Home Charging Program. At the
For example, the AB 617 incentive program
                                                           time of this brief, the administration has not provided
allocates 94 percent of funds to projects that
                                                           information on some of the key design features for this
benefit priority populations and achieves criteria
                                                           program. This includes:
pollutant reductions much more cost-effectively
than the transportation equity programs.                      •  How is this program different from other efforts
                                                                 to fund EV charging infrastructure for low- and
                                                                 moderate-income households? Currently, the
                                                                 state, local air districts, and utilities administer
                                                                 programs that offer financial incentives for

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2022-23 BUDGET

     charging infrastructure,
                                        Figure 7
     including infrastructure for
     multifamily dwellings and          Air Pollution and GHG Benefits Per Dollar Spent
     single-family households.          Estimated Tons Reduced Per $1 Million of Funding
     For example, the Clean
     Cars 4 All program in the
                                                                             120
     South Coast offers low- and
                                                                                                    FARMER
     moderate-income households
     financial support for home EV

                                         Weighted Air Pollution Reductions
                                                                             100
     charging infrastructure.
  •  What is the program outreach                                                                  Carl Moyer
     strategy? For example,                                                   80                   AB 617 Incentives

     will incentives for charging
     infrastructure be provided
                                                                              60
     at the car dealership upon
     purchase of the ZEV, or will
     households access this                                                   40
     program in some other way?
  •  How will this program                                                         Heavy-Duty Demos and Pilots
                                                                                        Other Transportation Equity
     target renters? Low-income                                               20
                                                                                                   Off-Road Equipment
     households are more likely to                                                                                                                  HVIP
                                                                                                                       CC4A
     rent their homes. As a result,
     an effective infrastructure
                                                                                           500         1000            1500   2000      2500    3000
     program targeted at
                                                                                                                 GHG Reductions
     low-income households
     will likely need to focus on       GHGs = greenhouse gases; FARMER = Funding Agricultural Replacement Measures for Emission Reductions;
     rental properties.                 CC4A = Clean Cars 4 All; and HVIP = California's Hybrid and Zero-Emission Truck and Bus Voucher Incentive Project.

   Potential SCS Pilots. The
administration might use some
                                                                                              National Electric Vehicle Infrastructure Formula
of the funding for transportation
                                                                                              Program—is already part of the Governor’s proposed
equity programs to pilot SCS intended to reduce
                                                                                              budget. According to recently released federal
VMT. We find that piloting potential strategies to
                                                                                              guidance, the state must submit a plan to the federal
reduce VMT could have merit, especially given the
                                                                                              government describing how funding will be used.
lack of progress the state has made in this policy
                                                                                              At the time this brief was written, the administration
area over the past several years. However, there
                                                                                              has not provided detail on how the $383 million
are very few details about how these pilots would
                                                                                              will be used. The other two charging and fueling
be structured and how they would be different
                                                                                              infrastructure grant programs are competitive
from other state programs targeted at reducing
                                                                                              programs and detailed federal guidance is not yet
VMT, such as the Active Transportation Program
                                                                                              available. For all programs, the federal government will
administered by the California Department of
                                                                                              only pay for a portion of the costs, with the remainder
Transportation (Caltrans) and the Clean Mobility
                                                                                              coming from other private or public sources.
Options program administered by CARB.
                                                                                                 Given the limited detail, it is unclear how the
Plan for Complementing Federal ZEV                                                            proposed state funding for ZEV infrastructure—
Infrastructure Funding Unclear                                                                ZEV infrastructure grants and Equitable At-Home
    As shown in Figure 8 on the next page,                                                    Charging—will be used to best complement
the federal IIJA established three main ZEV                                                   federal funding. For example, will any state funding
infrastructure programs. Funding for one of the                                               be needed to leverage federal funding? How do
programs—$383 million to Caltrans through the                                                 these state funding proposals help fill key gaps in
                                                                                              federal funding?

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2022-23 BUDGET

Multiyear Funding                                                                      and outcomes prior to committing additional
Approach Presents Trade-Offs                                                           funding. One potential solution to this would be
                                                                                       to require the administration to report annually
   Multiyear Funding Can Be Helpful for
                                                                                       on the progress of how funding has been spent,
Market Certainty and Program Administration.
                                                                                       key outcomes, key challenges, and plans for
The Governor’s proposal includes $3.4 billion
                                                                                       spending in future years. Second, multiyear funding
in new out-year funding commitments—mostly
                                                                                       commitments can create out-year General Fund
from the General Fund. Multiyear funding
                                                                                       pressure, which could limit the Legislature’s ability
commitments can have programmatic benefits.
                                                                                       to fund other priorities in future years.
First, for programs that aim to advance newer
technologies, a long-term funding commitment can                                       Some Proposed Spending Is Excluded
help provide a market signal to businesses making
                                                                                       From State Spending Limit
long-term investment decisions. For example, a
long-term state funding commitment to heavy-duty                                           The California Constitution imposes a limit on the
ZEV programs could provide greater certainty                                           amount of revenue the state can appropriate each
to businesses or government that are deciding                                          year. The state can exclude certain spending—
whether to shift their vehicle fleet to ZEVs. Second,                                  such as on capital outlay projects—from the
long-term funding can help state and local agencies                                    state appropriations limit (SAL) calculation.
design programs. For example, it could help CARB                                       The Department of Finance estimates that
make program design decisions (such as rebate                                          $260 million of the proposed 2022-23 spending
levels and eligible technologies) that help avoid the                                  in the Governor’s ZEV package is for activities
need to implement waitlists.                                                           that are excludable from the SAL. In constructing
                                                                                       its final ZEV package, the Legislature will want to
   …But Reduces Legislative Oversight and
                                                                                       be mindful of SAL considerations. For example, if
Creates Future General Fund Pressures.
                                                                                       the Legislature were to approve a lower amount
Multiyear funding comes with some potential
                                                                                       of spending on the proposed activities that
downsides too. First, since funding would be built
                                                                                       the administration excludes from SAL, it would
into the “base” budget, the administration would
                                                                                       generally need to repurpose the associated funding
not submit budget change proposals for this
                                                                                       for other SAL-related purposes, such as tax
spending in future years. This could reduce future
                                                                                       reductions or an alternative excluded expenditure.
legislative oversight by eliminating a process that
is often used to assess program implementation

 Figure 8

 Major ZEV Infrastructure Funding in IIJA
 (In Millions)

                                                                                                      Total Funding            Award       Total California
 Federal Program                                            Description                                  2022-26                Type          Funding

 National Electric Vehicle            Install EV charging infrastructure along designated                 $5,000             Formula            $383
  Infrastructure Formula                alternative fuel corridors, such as highways.
  Program
 Charging and Fueling                 Install public EV charging and alternative fuel                       1,250            Competitive         N/A
  Infrastructure Grants                 on public roads, schools, parks, and publicly
  (Community Charging)                  accessible parking facilities. Priority given to rural
                                        and low- and moderate-income neighborhoods,
                                        and communities with more multi-unit dwellings.
 Charging and Fueling                 Install EV charging and alternative fueling                           1,250            Competitive         N/A
  Infrastructure Grants                 infrastructure along designated alternative fuel
  (Corridor Charging)                   corridors and in communities.
     ZEV = zero-emission vehicle; IIJA = Infrastructure Investment and Jobs Act; EV = electric vehicle;N/A = Not available

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2022-23 BUDGET

RECOMMENDATIONS
   Consider Whether Different Mix of Spending               Direct Administration to Provide More
Better Achieves Legislative Priorities.                  Detail on New Programs. We recommend the
Ultimately, budget allocations for mobile source         Legislature direct the administration to report
programs will depend on how the Legislature              at budget hearings on the details of the new
prioritizes different policy goals. In determining its   programs that are being proposed, including the
priorities, we recommend the Legislature consider        Equitable At-Home Charging program and potential
such factors as:                                         SCS pilots. For example, how will the Equitable
  •  Near-Term GHG Reductions. To the extent             At-Home Charging program target renters? How
     near-term GHG reductions are a priority,            will the potential SCS pilots be different from other
     HVIP is one of the most cost-effective mobile       programs aimed at reducing VMT? Additional detail
     source incentive programs. However, overall,        could help the Legislature better evaluate the merits
     the GHG reduction costs for mobile source           of the proposed programs.
     incentive programs are relatively high, and the        Consider Delaying Funding for Infrastructure
     Legislature might want to consider relying on       Until Administration Develops Plan to Best
     other programs for the most cost-effective          Leverage Federal Funds. We recommend the
     GHG reductions, including regulatory                Legislature direct the administration to report this
     programs (such as cap-and-trade) or other           spring on its plan for ensuring state funding for
     spending programs that have lower costs             EV charging infrastructure will complement new
     (such as methane reduction programs).               federal funding. This includes a description of
  •  Near-Term Local Air Pollution Reductions.           how, if at all, state funding can be used to leverage
     To the extent total near-term reductions            federal funding for EV charging infrastructure or fill
     in local air pollution are a priority, then         in the major gaps in federal funding. So far, there is
     heavy-duty retirement and replacement               limited detail available from the federal government
     programs such as Carl Moyer and FARMER              about how some of the new programs will be
     are most cost-effective.                            implemented. If there is still insufficient detail at
                                                         the time the Legislature needs to adopt a budget
  •  Technology Advancement. To the extent
                                                         to meet its constitutional requirement to pass a
     long-term GHG and air pollution reductions
                                                         budget, the Legislature could delay additional
     are a priority, then the Legislature could target
                                                         state funding for light-duty ZEV infrastructure until
     funding to programs that focus on advancing
                                                         more details are available and the administration
     ZEV technologies in their early stages of
                                                         develops a clear strategy.
     market development. For example, it could
     prioritize funding for heavy-duty pilots and            Direct Administration to Report on Program
     demonstration projects and vouchers for             Evaluation Strategies. To ensure the Legislature
     heavy-duty vehicles and off-road equipment.         has good information about the net effects of
                                                         its mobile source programs, we recommend the
  •  Air Quality Benefits in Disadvantaged
                                                         Legislature direct the administration to report at
     Communities. If a priority is ensuring air
                                                         budget hearings about current efforts to improve
     quality improvements mostly accrue to
                                                         its program evaluation efforts. This report should
     disadvantaged and low-income communities,
                                                         include an update on efforts to more accurately
     then the Legislature could target funds to
                                                         assess the effects of individual programs in
     programs that reduce criteria pollutants
                                                         light of the interactions and overlap between
     cost-effectively and where the vast majority
                                                         regulatory and incentive programs. To the extent
     of the spending benefits low-income and
                                                         the Legislature authorizes funding to create
     disadvantaged communities, such as the
                                                         new programs or expand existing programs,
     AB 617 incentive program.
                                                         we recommend requiring the administration to

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2022-23 BUDGET

develop a plan for program evaluation prior to            and make it easier for departments to design and
implementing the program and awarding the funds.          administer programs. On the other hand, they
We recognize that this would likely delay project         have the potential to reduce future legislative
implementation slightly, but would greatly improve        oversight and create General Fund pressures in
the quality of information available to the Legislature   future years. It is also worth noting that the 2021-22
in future years to help inform future budget and          budget package already included 2023-24 funding
policy decisions.                                         commitments for many of these same ZEV-related
   Consider Trade-Offs of Multiyear Funding               programs. To the extent the Legislature provides
Commitments. We recommend the Legislature                 additional multiyear funding, we recommend
consider the trade-offs associated with over              it prioritize out-year funding for programs that
$3 billion in multiyear General Fund commitments          can help provide market signals to businesses
proposed by the Governor. On the one hand,                making long-term investment decisions, such as
these commitments can provide market certainty            heavy-duty and off-road voucher incentives.

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2022-23 BUDGET

LAO PUBLICATIONS

This report was prepared by Ross Brown and reviewed by Anthony Simbol. The Legislative Analyst’s Office (LAO) is a
nonpartisan office that provides fiscal and policy information and advice to the Legislature.
To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are
available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento,
California 95814.

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